ANALYSIS: The brewing app war - a tale of two CEOs

Two of the most powerful men in games were stood just metres apart at GDC last week, delivering back-to-back keynotes.

Yet their ideologies are worlds apart, and couldn’t more accurately convey the creative crossroad the games industry faces.

On one stage at the Moscone Centre, San Francisco: Nintendo boss Saturo Iwata, delivering his fourth GDC keynote.

In the Yerba Buena building next door: Apple CEO Steve Jobs, revealing iPad 2 at a press event coincidentally timed to begin as the Nintendo boss left the stage.

Iwata’s talk culminated in a call for developers to turn away from creating low-value iPhone and Facebook apps, saying it threatened their long-term livelihoods.

Jobs opened by revealing Apple has paid $2bn in revenues to app developers since the App Store arrived two and a half years ago.

Iwata’s talk recounted games’ first 25 years and the medium’s eventual blossoming into the likes of World of Warcraft. Jobs barely mentioned our industry, even though – with a faster processor, HDMI out, cameras and gyroscope – Apple’s new device is built with games in mind.

But while a lot has since been written about the former’s attack on app-culture, or Apple’s quick cut to gaming’s core, the real story isn’t what they said – it’s what they didn’t say.

And, in the end, although many see them radically opposing – one a gaming dinosaur, the other an emerging colossus, said one pundit – it’s that both have very similar, aggressive intentions for the video games industry.

OLD GUARD FIGHTS BACK

You could tell Iwata’s keynote was going to be more downbeat – usually, for the GDC crowd, he busts out the shiny blazer. Last week it was a sombre suit.

But his words said it best, confessing that his biggest fear is that games are ‘drowning’ in a sea of apps.

“Our business is dividing in a way that threatens the continued employment for many of us that create games for a living,” he said.

“The objective of mobile and social network platforms, and the reasons these vehicles were created, are nothing like ours. These platforms have no motivation to maintain the high value of video games software. For them content is something created by someone else. Their goal is to gather as much software as possible because quantity is how they make money, quantity is how they profit. The value of video games software does not matter to them.”

He called the gulf between Nintendo versus the smartphone and social games worlds “two distinct sides of the games business”.

But take his warning another way: Nintendo fears being left behind. A mass migration to cheap games on non-games platforms is contrary to its business. It sells hardware to justify software made by its studios and third parties. And the backdrop: it is now the last remaining Japanese games company to resist the digital revolution. Capcom, Konami, Sega and others are embracing downloads wholeheartedly – through PC, social networks, 360, PS3, mobile… not Wii or DS.

“The fact is, what we produced has value and we should protect that value,” said Iwata, as much a point about content generally as specifically boxed product like £39.99 3DS games.

“All is not lost. Games as diverse as Just Dance, Wii Fit, uDraw, Wii Sports, and Art Academy have all found audiences on Nintendo consoles. There are similar stories on other platforms.”

But what would someone like Unreal Engine creator Epic Games have to say about that? It is best friends with EA, Microsoft and every other third party, while turning tricks on iPhone with Infinity Blade, which costs a fiver. Yet its technology has ignored Nintendo platforms three times over this generation, while adopted in spades across next-gen and mobile. Says a lot. Says that not every third party succeeds the way Iwata thinks.

But Iwata’s worries aren’t without merit – he is acknowledging a fast-developing, and increasingly disparate two-tier industry. One which features only luxurious, boxed and usually triple-A games – and another of cheaper, disposable software. This isn’t a new view. Pundits, analysts and publishers have forewarned it for some time. We saw the first sign with premium priced Modern Warfare 2 in 2009. However Iwata’s comments are the first admission this trend can impact format holders, too.

And you can see why he’d be scared: Nintendo is a wonderful firm with a perfect model working to the industry’s favour most of the time. Devalued content upsetting that is a real cause for concern.

TAKE YOUR TABLETS

Not a concern for Apple, though. It must revel in the thought of an app tidal wave washing away its rivals. However, games barely got a look in when Jobs was on stage.

In that context, Iwata is bang on the money: Apple doesn’t care about game developers. Or if it does, it cares in the way it cares about fitness or business apps firms – means to an end to reach critical mass. New Apple content guidance rules dispel Iwata’s claim that there is no consideration for quality, but heralding a bamboozling 10,000+ apps proves a point on quantity.

Same when it comes to iPad versus other tech. Apple is regularly aggressive about market share – just two years ago it opened an iPhone showcase saying apps had outsold DS games. Last week the target was rival tablet devices.

Apple’s rivals “are looking at this like the next PC. The hardware and software is from separate companies,” said Jobs of the market Samsung and co have tried to build with Android tablets.

By contrast, iPad is a ‘post-PC’ device, he boasted. Yet, it isn’t: you still need to plug an iPhone or iPad into a PC or Mac to validate it through iTunes when you first buy it. Of course, the sheer dominance of iTunes exposes a Nintendo weakness – its fear of the internet, and lack of strong online infrastructure.

Jobs said companies like Apple best placed to exceed in technology “have the right architecture not just in silicon, but in the organisation building these products”, fusing iTunes and devices perfectly. “Hardware and apps need to intertwine in a seamless way.”

But, er, Steve – sounds like you were describing Nintendo. Iwata himself said minutes before: “We see hardware as something our consumers reluctantly purchase to enjoy the games they want. Matching game ideas with our hardware is the surest way to provide meaningful surprises.”

RIVAL SCHOOLS

The contrasts, and similarities, between these two ends of the market couldn’t be clearer. The two, embodied by Nintendo and Apple but including everyone up and down the value chain, are on course for a fight over consumer attentions. A battle bloodier than either camp will admit. Premium boxed game versus cheap app; the irreversible distortion of what a game is worth.

The battle is already well underway in fact: that Apple chose to put its event on just after Iwata’s says more than anything either CEO claimed about individuality. All are bidding to transform games. The fact iPad 2 rolls out in the UK on March 25th, same day as the DS (due to shipment and manufacture timings), just rubs salt in a deepening wound.

And if there’s another lesson to take from last week’s tale of two CEOs, it’s this: big businesses, whether games firms or other technology giants, have to look after Number One first. For many, they permit us to live in their world, their ecosystem of hardware and content – which means we must and should listen when they speak. Doesn’t necessarily mean we always believe them, however.

MCV is the leading trade news and community site for all professionals working within the UK and international video games market. It reaches everyone from store manager to CEO, covering the entire industry. MCV is published by NewBay Media, which specialises in entertainment, leisure and technology markets.